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A different perspective on e-returns…

I am an active follower of a lot of blogs, but very few discussion groups. For me, I often find that the discussion groups are too general with high volume (Dorothy-L), or too technical (some web-focused ones), or too narrowly focused (single app approaches, for example). I do however follow the “Murder Must Advertise” discussion group regularly as it seems the right mix of volume, topics, and valuable content. This past week, one of the hot topics has been Amazon allowing readers to return e-books for refund, and it got me looking at it a bit more broadly.

Not surprisingly, the people who are in favour of allowing returns are mainly readers, those against are mainly writers. Those in favour argue that of course returns should be allowed, since sometimes you buy the book with high hopes and confidence and it turns out that the thing is a steaming pile of armadillo dung. This happens despite reading previews, other reader’s reviews, etc. Those against allowing returns tend to follow one of four threads of thought:

E-books don’t cost a lot of money, and for those less than $2.99 on Amazon, we’re talking extremely small profit margins. So authors aren’t getting rich here. As a result, they argue that it is too burdensome on the bottom-line for authors to have returns taking away their meagre profits.

On a related note, some would also argue that it is offensive or embarrassing for someone to return something that costs so little.

Some argue that writers are creating content, not the book — and you can’t return content. It is both priceless and worthless, so returns are not appropriate for that type of product.

The final argument is usually that there is a danger of people doing the literary equivalent of a “dine and dash” — returning it after they already have read it.

I understand those arguments, even if I don’t agree with them. First of all, the size of the profit margin doesn’t determine whether a customer (i.e. the reader) feels they should have the right to return something. Equally, for the second argument about the cost, a $2 purchase might be a significant luxury for one person, while the other considers it pocket change. It’s a slippery slope to offending customers to say its too small an amount to worry about, if the customer is telling you they are worried about it enough to want to return the book. Some people are even returning FREE books, just because they want to signal that the book was so badly written or formatted that it shouldn’t even be given away! Price isn’t a determining factor. For the last two threads, neither are particularly compelling — one is semantics that matter to a writer, but not a reader, and the other is just a straw man. People return the books for legitimate reasons (in their mind at least), not because they are trying to rip off the writer. In fact, the reasons for returns of any product, outside of food, are long and varied — ranging from the three inter-related biggies (simple buyer’s remorse, product defect, or price cheaper elsewhere) to a laundry list of unrelated areas (error, gift return, poor pre-purchase research, aesthetics, or the ever popular strawman mentioned above).

I leave it to others to argue about the merits of the above, or other reasons for and against. Instead, I want to share four other perspectives on e-returns.

Friction — The goal of any sales environment is to have “frictionless purchases”, to use the business vernacular. This is what Amazon has been trying to patent with their “one-click” purchase methodology. Don’t make people re-enter their info or even confirm — one click, and they’re done. Same with the fact the Kindle books appear directly on your ereader device. Frictionless. It’s also the same rationale, by the way, for people offering pricing at $0 or $.99 — it reduces the buyer’s friction in trying you out. If you remove returns, you have shifted all potential “sales” risk from the seller to the buyer. In other words, people will pause before clicking “BUY”. And not just the people likely to do returns. The evidence from other environments is quite high — regardless of price, a no return policy can reduce sales by as much as 30-50% on clothing (much higher if you don’t have change rooms), and if I recall the numbers, 80-90% on electronics. Not surprisingly Nook’s lacklustre market penetration is compounded by poor website design, no-returns, and higher prices (three big frictions). One way to overcome “no return” friction is name-brand recognition, but unless you’re Stephen King or James Patterson, the buyer perceives new authors as risks. Previews help, but are far from perfect, as mentioned above. And don’t get me started on a recent read, where the competence demonstrated by the first 7 chapters of the book disappeared in Chapter 8 with no warning.

Success — To paraphrase a high-ranking and extremely successful Japanese businessman I had the pleasure of meeting back in 1997, there are only five areas where a no return policy is appropriate:

In fact, for those who read the lovely historical approaches to “sales” (like aggressive sales tactics like “don’t take no for an answer”, etc.), one of the marks of knowing when you have reached the right degree of sales and marketing is when you are generating returns. It means you’ve sold to all the people who were “right” for your product, and you are now getting returns from the people who were “near-right” for your product. Returns at that point are not signs of personal failure, or even market failure, but a sign of success.

Pies — Many of the proponents of the “no return” policy are also offended by low prices on ebooks or disbelieving of the successful anecdotes offered by people regarding Kindle Select. For those looking for more “data” / “evidence”, check out Sourcebooks Casablanca website — they had a Q from a reader asking why they, as a publisher, would give away books. Not a small indie, not a self-published author. Their response was limited to focusing on 7 adult fiction titles (in romance and in general fiction) for free within the past 6 months and they found “On average, full-price sales for the 4 weeks after the promotion were 46 times greater than the 4 weeks before the promotion.” In other words, they sold four year’s worth of books in the month after the promotion. Now that varied — some were as “little” as 7-12 times increase…but the average was a 46-fold sales increase. Not conclusive, but a nice validation of others experiences. For those who claim that it must just hurt future sales, giveaways for promotion are the same logic as going from selling locally (small market) to selling national (large market) — you gave it away, sure, but you are now known to a MUCH LARGER market than before. If you had time to go door-to-door, sure, you might have reached those people through other means. But unless you’re repeating John Locke’s previous car tour approach (which sounds almost like door-to-door sales! ), this is a pretty efficient means (at least at present) to reaching greater awareness…building sales by enlarging the pie. And returns are just a small piece of that pie.

Negative but hidden feedback — Another concern a lot of people have out there are negative reviews. If you take away the option for returns, the number of negative reviews will greatly increase — the vast majority of those who do returns are then satisfied, they have their money back. They move on. But if they can’t return the product, they vent another way — in message boards, and reviews. Right now, an author sees returns and is therefore getting feedback of a sort, but it is hidden. Take away returns, and any negativity will start to show up in the reviews pretty fast. And in some cases, magnified because the reader feels like they got “taken”.

Just some alternate ways to look at returns as perhaps helping your sales, rather than hurting them…